The deteriorating outlook for real wage growth is the battleground for unions seeking to protect their members from the cost of living crisis, culminating in the upcoming national rail strikes.
In a time when people are attempting to better protect themselves from the cost of living crisis, the most recent employment statistics reveal that inflation is taking a record to bite out of regular pay and that the unemployment rate has jumped unexpectedly.
The Office for National Statistics (ONS) reported that real wages – a measure of regular wage growth when inflation is taken into account – dropped by 4.5 percent in April.
This was the most significant decline since records began in 2001.
According to the ONS, it primarily reflected the surge in headline inflation during that month, when the unprecedented increase in the energy price cap drove the consumer prices index to a 40-year high.
The unemployment rate increased to 3.8% in the three months leading up to April, despite employment reaching a new record high.
It may be explained by a rise in the number of economically inactive students, as the ONS has already reported record numbers of people seeking paid work or better-paying employment.
As inflation has increased, there has been a scramble for higher take-home pay.
The squeeze on incomes caused by rising costs across the board has contributed to a significant economic slowdown and sparked an acrimonious union battle for pay raises to match inflation.
Sam Beckett, head of economic statistics at the ONS, stated, “Today’s data continue to paint a mixed picture of the labor market.
“Although the number of employed people increased again in the three months leading up to April, the figure is still below pre-pandemic levels.”
Moreover, although the number of people who are neither working nor looking for work has decreased slightly in the most recent period, it remains substantially higher than it was before the outbreak of COVID-19.
“At the same time, unemployment is near a 50-year low and there has been a record low number of layoffs.
“Job openings continue to slowly increase. At a new record high of 1,3 million, this is more than half a million more than before the outbreak.”
She added, “The high level of bonuses continues to cushion the effects of rising prices on total earnings for some workers, but if bonuses are excluded, pay in real terms is falling at the fastest rate in more than a decade.”
It is widely anticipated that the Bank of England will raise its interest rate once more on Thursday to prevent the inflationary spike from becoming a long-term issue if employers resort to paying significantly higher wages to fill vacancies.
As rising wages are viewed as making inflation more tenacious, so-called secondary inflation is a major concern for policymakers.
However, the rate-setters are facing opposition from unions, which are largely advocating for wage growth in line with inflation for their members.
The main battlefront is on the railways, where the RMT union has threatened the largest national strike since 1989, involving 40,000 rail workers and coinciding with strikes on the London Underground on 21 June.
Frances O’Grady, general secretary of the TUC, stated, “Working families deserve financial security.
“However, real wages are plummeting as the cost of living soars.”
“Millions of workers must choose between paying their bills and providing for their families. That is not correct.
“Immediate action is required to give people the raise they deserve. This necessitates an increase in the minimum wage, a real pay increase in the public sector, and the government supporting – not attacking – unions that vigorously advocate for fairer pay.”
Chancellor Rishi Sunak stated, about the ONS data, “Today’s statistics demonstrate that our job market remains robust, with redundancies at a record low.
“Helping people find employment is the most effective way to sustain families over the long term, and we will continue to assist people in finding new and better jobs.
Eight million of the most vulnerable families will receive a minimum of £1,200 in direct payments this year, while all families will receive £400.
